Some news items.
An influential strategist, Abby Cohen, stepped in to calm the stock market with a widely distributed note urging her firm's clients to stay the course.
interactive.wsj.com
PLESE READ THE COMPLETE ARTICLE IF TIME PERMITS.
Excerpts:
Ms. Cohen, whose bullishness was echoed Wednesday by strategists Edward Kerschner of PaineWebber and Thomas Galvin of Donaldson, Lufkin & Jenrette, among others, didn't refer directly to Mr. Acampora. But the loud reversal broadcast on CNBC-TV late Tuesday by Mr. Acampora, who had been calling for Dow 10000, brought gurus of every stripe out of the woodwork.
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Stocks are trading at undervalued levels," Ms. Cohen said in the note. "We believe that market action in recent weeks represents an overreaction to incremental information." In an interview just after the market closed Wednesday, she added that investors have been plagued by "misperceptions" about the health of corporate America.
Cheerful Views
As for second-quarter earnings, which many investors have been concluding are too lackluster for their taste, she wrote: "Better than you think." The Asian economic drag? "Impact on the U.S. not likely to worsen." How about inflation? "It's hard to find. Interest rates not likely to rise."
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She argued that, excluding nonrecurring charges, operating earnings of the Standard & Poor's 500 index companies appear to have increased a respectable 5.7% in the second quarter. More importantly, she sees improvement in 1999 as a result of "stabilization in Asia," with operating earnings likely to be up 8% to 9%. She thinks current price-to-earnings multiples are justified, given unusually low inflation and interest-rate levels, among other factors.
Of the market's recent volatility, she said it is within a "choppy trading range" that she has expected since April, when the Dow first approached 9300. "Stock prices had risen some 25% to 35% during the preceding five months, and we indicated our belief that some time would need to pass before investors felt comfortable about the fundamental support for further gains," she said.
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As for others' more pessimistic views, she professed to pay "very little attention to what others may be saying," explaining that she focuses on fundamentals instead of the charts and other statistical material that form the basis for work by technicians like Prudential's Mr. Acampora.
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end of article
Tech Center
GeoCities goes for IPO gold.
interactive.wsj.com
Excerpts:
The hot start-up will find out if it can work the same magic on the now-shaky stock market next week, when it is scheduled to go public and hopes to join the cavalcade of other Internet companies that have seen their valuations soar.
Third-Busiest U.S. Site
As with most other Internet start-ups, investors will bet on an uncertain future. GeoCities is a money-losing venture with tiny revenue whose strategy to develop a profitable business model carries no assurance of success. The company attracts an estimated 10 million people to its Web site every month -- placing it third behind America Online Inc. and Yahoo! Inc. in the sweepstakes for most-frequented site accessed from U.S. homes, according to Media Metrix, a market-research firm in New York. But the Santa Monica, Calif., company reported just $2.2 million in revenue in its March-ended quarter and has accumulated losses of $15.7 million over its four-year existence.
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By August 1996, according to Media Metrix, about 2.1 million different individuals visited the site. As of June, the latest period for which estimates are available, Media Metrix reports that number had surged to 10.3 million. People were drawn to everything from ruminations on television's recently ended "Seinfeld" series to Dawn's Home Page of Life, Love and Romance ("This is a site for all the people out there who are helplessly in love, or for the people who are dreaming of the day when they will be," it says.).
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Top 10 Web Sites
At Home % Reach At Work % Reach
Aol.com 44.9% Yahoo.com 50.6%
Yahoo.com 41.8 Netscape.com 38.2
Geocities.com 25.5 Aol.com 35.3
Netscape.com 24.5 Microsoft.com 32.2
Microsoft.com 23.8 Excite.com 28.4
Excite.com 22.9 Geocities.com 23.0
Infoseek.com 14.9 Infoseek.com 22.7
Tripod.com 13.7 Lycos.com 19.8
Angelfire.com 12.4 Altavista 17.1
Lycos.com 11.8 Msn.com 13.0
Note: Measurement period is June 1, 1998 through June 30, 1998
Source: Media Metrix, The PC Meter Company
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With so many eyes perusing its site, the now-42-year-old Mr. Bohnett and his executives began recruiting paying advertisers. The company reports collecting $314,000 from mostly ad revenues that first year, with the amount jumping to $4.6 million in 1997.
As with most of its competitors, GeoCities hopes to make advertising one of its major sources of revenue, even though many Web companies are now beginning to focus much more on electronic commerce and transactions. While the dollars so far are not huge, analysts believe they will eventually grow enough to contribute mightily to the bigger companies on the Internet. "The ability of all these sites to attract ad expenditures is directly related to their ability to attract a mass audience," says Doug McFarland, an analyst at Media Metrix. "Advertising always chases a large audience."
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But just as content companies move onto GeoCities' turf, it is likely to move onto theirs. Mr. Laube says it could join forces with one of the directory companies, for instance, just as Netscape Communications Corp. did with Excite Inc. And to widen its revenue base, GeoCities is already encouraging small-business transactions on its member home pages for a fee. The company indicated in its filing it plans a general expansion into electronic commerce. Analysts say those ventures could include getting a cut from companies that do transactions and hosting on-line meetings for corporations.
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End of article
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Networking Stocks Are Mixed
After Cisco's Earnings Report
interactive.wsj.com
Excerpts:
Wednesday, shares of Cisco jumped 3 5/8 to close at 96 3/4 on the Nasdaq Stock Market. Shares of 3Com advanced 9/16 to 24 13/16, while Ascend Communications slipped 3/4 to 46 15/16, both on Nasdaq, and Newbridge Networks fell 15/16 to 20 and Cabletron Systems lost 3/16 to 10 11/16 on the New York Stock Exchange. Bay Networks, which has agreed to be acquired by Northern Telecom, was unchanged at 32 1/2 on the Big Board.
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Among the more positive elements of Cisco's report, said Paul Johnson, an analyst at BancAmerica Robertson Stephens, is that Cisco doesn't seem to be troubled by the pricing pressures plaguing other players in the sector. "Cisco's unit volume is not that much bigger than the rest of the industry," he said, "but the company's exposure to price erosion" is very small.
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Also benefiting the whole sector, he said, is the fact that growth in Europe has made up for slowing revenue out of Asia -- but adds there is some question about how long that situation will last. He has a "strong buy" rating on Ascend and a "buy" on 3Com.
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Wednesday's Market Activity
Elsewhere in the tech sector Wednesday, Sun Microsystems' options and stock were trading strongly on speculation that the company is a takeover target of International Business Machines. Shares of Sun climbed 2 3/8, or 5.2%, to 47 13/16 on Nasdaq, while IBM's shares advanced 1 15/16 to 128 3/4 on the Big Board.
The talk -- about which neither company would comment -- follows the two firms' unveiling of an operating system for business computers based on Sun's Java programming language. The rumors originated in the options market after a major institutional firm executed an enormous buy order for speculative out-of-the-money calls, traders said. One source, who said the rumor had definitely put a spark in Sun stock, said he had heard "not to look for anything until October."
Meanwhile, America Online slipped 3 1/2 to 107 1/2 on the Big Board. AOL said fiscal fourth-quarter operating income climbed more than tenfold, surpassing Wall Street's expectations (see article). However, AOL was forced to delay reporting net income due to problems figuring out the amount of special charges. The on-line service provider said operating income reached 23 cents a diluted share, compared with three cents a share a year earlier. Analysts surveyed by First Call estimated the company would earn 19 cents a share. Everen Securities cut its rating to near-term "market performer" from near-term "outperformer."
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